Westfield sells US shopping centre stakes for $670 million to O'Connor

Westfield Group, the world's biggest shopping centre operator by assets, said it sold half shares in six malls in Florida to O'Connor Capital Partners for about $US700 million ($670 million).

Westfield agreed to sell a 49.9 per cent interest in the shopping centres at book value, valuing the joint venture with the New York-based real estate investment and development company at about $US1.3 billion, the Sydney-based company said in a statement to the Australian stock exchange. Westfield will continue to manage, develop and lease the properties, it said.

Westfield ... agreed to sell a 49.9 per cent interest in the US shopping centres at book value. Photo: Andrew Quilty

"This agreement carries on the group's strategy of introducing joint venture partners into our assets globally as well as disposing of non-core assets," Westfield co-Chief Executive Officer Peter Lowy, said in the statement.

The transaction will dilute Westfield's 2013 funds from operations by about 1 cent per security, it said. The dilution will be offset when the company reinvests the capital raised, it said.

Brokers said Westfield is expected to use the $700 million raised from the sale of its interests in the US asset for its global development program and its ongoing on-market buyback. Under the current scheme there is still about 130 million shares to buy back. The sale, which was flagged last year, is part of the group’s strategy to enter into joint ventures across its US, Europe, Australian and New Zealand business.

In the past 18 months it has sold down its stakes in the US, London and Australian shopping centres to a range of private investors including to the London-based Hammerson Plc, the Canada Pension Plan Investment Board, Starwood Capital Group LLC and Westfield Retail Trust.The aim is for the Westfield Group to retain the minimum 25 per cent interest needed to keep the management rights to the separate malls.

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Simon Wheatley from Goldman Sachs Australia said the asset sale does not impact his earnings per security growth outlook or fundamental view.

‘‘It is in line with the stated strategy of increasing joint ventures to reduce capital employed and move toward a business which is more operationally leveraged,’’ he said.‘‘It is also notable that Westfield wants to target ownership of larger franchise assets. Four of the six assets sold in the Florida portfolio have asset values of less than US $160 million. The sale appears to be in line with this strategy.’’

Against the backdrop of the US sales, there is ongoing speculation that it could look to sell down its stake in the Australian asssets to its listed associate Westfield Retail Trust.

According to JP Morgan’s analysts, there is a case for $5 billion of Australia/NZ assets to be sold down to Westfield Retrail Trust (or the highest bidder). And $2.5 billion of prospective development exposure could be sold, halving Westfield’s interest on completion.

‘‘In all we think as an end-game that Westfield could be comfortable selling the entire NZ portfolio (perhaps excepting two assets), and in Australia selling down all exposure to 25 per cent,’’ the brokers said.

‘‘We say that because Westfield’s water-tight management contracts make clear that whilst ever a 25 per cent stake is held by a Westfield entity it will retain management rights. Such a transition would see about $5 billion of cash raised and is a process that Westfield controls almost completely.

This agreement carries on the group's strategy of introducing joint venture partners into our assets globally as well as disposing of non-core assets

‘‘It could do the whole lot in one go, package small portfolios over a multi-year process, keep more of the best and sell 100 per cent of the weaker assets…a listed offshoot with a healthy unit price provides plenty of optionality and Westfield knows how to maximise value from this arrangement.’’

Westfield shares were trading at $11.00 shortly before 2pm on Monday, a 24c increase on Friday's closing price.